Where a loss in a trade, profession or vocation is sustained during the 12 months prior to the date on which a trade, etc. is discontinued, it may be carried back and set against earlier profits of the same trade (ITA 2007, s. 89). Such losses are referred to in the legislation as ‘terminal losses’, and are given special treatment because it is clearly not possible to carry them forward as normal.

Terminal losses are trading losses sustained in the ‘terminal loss period’ (ITA 2007, s. 90(1)). This is the final 12 months of trading but is divided into two parts:

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